While most Stock Gumshoe readers are here in the US or in Canada, there are loyal followers of the mighty Gumshoe all over the world — particularly in the English speaking parts, naturally, and I always get a bunch of questions about stocks teased by some of the British and Australian newsletters … so today, we’re taking a look at a teaser from The Bulford Files, which is Tom Bulford’s “upgrade” letter for folks who aren’t satisfied with the sexiness of the picks in his Red Hot Penny Shares. I’ve written about a few of his ideas in the past, though it’s been a couple years … so let’s jump in again, shall we?
Today’s tease is all about oil once again — this time, the scramble for oil in the Falkland Islands, a story we’ve heard before over the last couple years but which has heated up with some recent drilling results.
Here’s some more of the hype:
“A potentially COLOSSAL deposit of oil has been hidden beneath a tiny island in the South Atlantic for centuries…
“Now – thanks to a “breakthrough” oil strike – one small company could be on the verge of a blistering PRICE SURGE!
“Lock on to this shrewd little stock TODAY and it could make you £440,275 richer!
“That is not a misprint – this overlooked London-listed firm could eventually climb 17,611%! Give me a few minutes RIGHT NOW and I’ll tell you all about it…
“Invest in this little-known business NOW… because should everything go to plan – and the pumps get fired up – this share could shoot up higher and faster than anything you’ve ever seen!”
Of course, “should everything go to plan” I’d be cashing in my winning Powerball ticket this morning. Unfortunately, anyone can have a “plan.” So what’s behind this one that has Bulford so excited?
“But I’ll make no bones about it – you don’t have long to get in. You have to act quickly.
“In just a few days, this company will be positioned to test-drill. And that could turn the ignition on a truly gigantic price climb.
“I’ll be frank – this small London-listed share is very close to erupting… in fact, just a few whispers on the internet or in the back pages of the FT can send oil stocks like this racing through the roof.
“The firm that started the oil frenzy, Rockhopper, has already leaped 167% in just 6 days! That was on the back of results from their test-drill.
“And the City are now scrambling like mad, trying to get in on the NEXT stock which could be about to explode…
“Luckily, I’ve been way ahead of the game on this one.”
OK, so he goes through quite a bit more, most of it focused on the fact that modern seismic surveys have made it feasible to target oil drilling offshore the Falklands (or Las Islas Malvinas, if you prefer), and that the estimates for oil in the region have consistently risen over the years, to what is now a total estimate of 60 billion barrels.
Then we get into more about this particular company:
“At this company’s May 2009 AGM analysts revealed that a find of half a billion barrels of oil could be worth £14 per share…
“…and a discovery of 3.5 billion barrels could be worth £100 per share.
“But remember, we’re not talking about half a million barrels, or even 3.5 billion barrels. We’re talking about as much as 60 billion barrels! …
“Plus you’ll get the full lowdown on why buying this share not only puts you in the running for some spectacular gains, but a unique way to considerably lower the risk usually linked with small exploration companies.”
OK, so that “lower the risk” bit caught my attention. I get promises of 20,000% profits every day … but lowering the risk is intriguing. More on that in a minute.
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Here are a few more clues culled from the letter to help us narrow it down:
“on 3 June 2005 the Board announced its delight at the results of the seismic survey work…
“… a non-executive director snapped up 5000 shares on 10 February 2006…
“And on the 1st October 2008 the most significant development so far… a major industry giant agreed to partner the Falklands oil project and pay for the drilling to begin!”
OK, so just to warn you — I think most of those clues are off by a little bit, assuming I’m right about my solution (more on that in a moment).
But the real move is expected to come by next month, according to Bulford:
“You’ve got until 10th June to get in: This spectacular growth story has just hit its ‘trigger point’!
“This company is getting ready.
“Within a couple of weeks, their rig will be in place to start test drilling.
“And that news alone could send all the big City investors piling in, trying to get a head-start on the action.”
And then we get to the “lower the risk” part:
“When I first learned about the Falklands oil discovery, I was impressed with the oil potential. But what really excited me was learning that, even if the price of oil drops by 50% overnight, you could still make money.
“Sound weird? Let me explain…
“The truth is, the investment I’ve been telling you about isn’t another typical “oil play”… it’s something a lot sharper and a lot shrewder than that…
“It’s what I call a “hidden value” investment, because it has more than just a stake in the Falkland oil profits.
“In fact it’s a very profitable, 156-year-old established company and it owns 8.2% of an oil driller that could be about to make a BIG strike!
“Now consider the potential here…
“Remember, just off the East Falklands coast lies an estimated reserve of 60 billion barrels.
“How much is that worth? Well, even if oil drops more than half its current price… and sells for $35 a barrel… that still amounts to $2,100 billion of oil reserves – worth about £1,295bn.
“8.2% of that is worth £106bn… and the total value for this entire company on the stock market is currently less than £50m!
“Do you see why this company is a brilliant ‘hidden value’ share?”
OK, so who are we dealing with here?
Well, the nameplate company for these oil exploration parcels south and east of the Falklands is Falkland Oil and Gas Ltd (FOGL) — and I can verify that Bulford has been interested in their story for a while, we saw a very similar teaser way back in 2008 for one of his other letters, it e